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Malaysia’s telco industry on edge amid new developments, appointments

Spotlight trained on newly appointed key regulatory personnel that could see a change in Malaysia’s telco policy, including a deferment of 5G roll-out

Malaysia’s telecommunication industry is experiencing a stretch of uncertainty due to several high-profile developments in the past few months, including a change in the communications minister, the appointment of a new regulatory head and an adviser to the minister.

These developments have contributed to confusion among industry players and have introduced elements of unpredictability in Malaysia’s telco landscape, both of which do not augur well for the advancement of the industry, according to several senior telco executives Computer Weekly spoke to.

The saga began in mid-February when Malaysia went through a change in government, with new prime minister Muhyiddin Yassin replacing then prime minister Mahathir Mohamad in March.

With a new government in place, the communications and multimedia ministry portfolio fell to 59-year-old Saifuddin Abdullah, who replaced his predecessor, Gobind Singh Deo, who was appointed in May 2018 under the previous administration. Abdullah was the former foreign minister under Mahathir’ tenure as prime minister.

Industry players were looking to engage with the newly minted minister on a wide range of issues that included the award of much-needed radio frequency spectrum allocation for the coveted 700MHz band; the allocation of 3.5GHz, 26GHz and 28GHz for 5G roll-out; and various other industry developments.

But the coronavirus pandemic put a dent on any hopes of advancing talks or any engagements with Abdullah, noted industry observers.

What’s more, after almost three months of lacklustre activities due to the pandemic, Abdullah was embroiled in the back-peddling of a controversial policy announcement on 3 June, amid reports of a surreptitious decision to allocate frequency spectrum to five Malaysian operators made two weeks before.

Abdullah went on record to say that he had cancelled the initial award, citing “technical issues, legal requirements and the need for a transparent process”.

And before the dust had settled on that episode, Abdullah made another sudden move when he made two high-profile appointments on 9 June.

In a statement in Malay, he announced that the communications and multimedia ministry had appointed Fadhlullah Suhaimi as the new chairman of the Malaysian Communications and Multimedia Commission (MCMC) and for two years beginning 10 June, abruptly ending the incumbent chairman Al-Ishsal Ishak's tenure by four months.

A former executive at Telekom Malaysia, Suhaimi was also a commissioner at the MCMC but left in 2018. Prior to his appointment as MCMC chairman, he was the vice-chancellor and CEO of Perdana University.

Ishak was formerly the CEO of Pos Malaysia, and Gobind Singh’s pick for the MCMC top post in Oct 2018 for a period of two years.

Meanwhile, the ministry also announced the appointment of the former CEO of Telekom Malaysia, Zamzamzairani Mohd Isa, as Abdullah’s telecommunications advisor.

When asked what all these recent developments meant for the industry, two senior telco executives did not know what to make of it.

“All we can do is wait for further announcements to be made by MCMC to us,” one executive said on condition of anonymity because of the sensitive nature of the developments. “But what has conspired isn’t exactly good for the industry.”

Single consortium idea

Ishak’s management style was seen to be more open and transparent than the previous MCMC chairmen because he was an outsider, eager to do things differently from previous administrations, industry watchers noted.

He was also more marketing and media-savvy than his predecessors, many of whom were bureaucrats or engineers, and not as approachable with the media, they added. 

Ishak sought to engage the industry and the public more by promising to release more details of MCMC’s ideas through public inquiry exercises, and called for the use of open tenders in dealings with the industry.

In April 2019, Computer Weekly reported Ishak as saying that Malaysia’s 5G spectrum biddings are not for profit. Such a statement by the MCMC chairman was seen by industry players as refreshing.

But he was not without his detractors as well. Under his watch, the telco industry had been on track to award a number of spectrum blocks via open tender based on a concept he championed known as “a single consortium”.

The idea came about after the MCMC conducted a public inquiry in July 2019. By January 2020, the MCMC concluded its public inquiry report and recommended that the 700MHz and 3.5GHz bands being considered for allocation be done via “a single entity comprising a consortium formed by multiple licensees, instead of individual licensees.” 

“MCMC will undertake [an open] tender process for this purpose and this approach is intended to lower capital expenditure (capex) by minimising costs and preventing the duplication of infrastructure, at a time where improvements in 4G networks are continuing,” the report read.

“As this is a new approach, the MCMC will only make available 2x30MHz of the 700MHz band and 100MHz of the 3.5GHz band. The remaining frequencies of these bands will be considered for assignment at a later stage,” it added.

The decision was a mixed bag at best. While industry watchers welcomed the concept of not duplicating expensive infrastructure capex for 5G roll-out, they were also critical of the single consortium idea, as it would be extremely difficult to implement in practice.

“Operators are unlikely to get the best value for their respective shareholders when working in a single consortium,” said one insider. “The single consortium idea has never worked in other countries, so why would it work in Malaysia?

“Also, the competitive dynamics means that respective shareholders in the consortium will have different motivations and agendas. Who will end up the winner and lead the consortium, especially now that two Telekom Malaysia alumni are running the show?”

Pros and cons of consortium approach

Still, the idea of a single consortium has some validity and discussions have cropped up in countries that see 5G as a strategic instrument to their economic growth, said Neil Shah, research director at Counterpoint Research.

Speaking to Computer Weekly in an email interview, Shah argued that the chief benefit of the consortium is for its members to optimise network costs and give operators the ability to accelerate network roll-out.

Shah said that this would make the network a level playing field for all and that now operators would have to differentiate themselves based on service-level agreements (SLAs) virtualised capacity and differentiated 5G services, instead of solely on network capabilities.

“Once cost is out of the way, 5G becomes a ‘blue ocean’ opportunity for operators as they scale their businesses and focus on differentiated services and capabilities,” he said.

“The consortium can also license the network to private 5G networks run by large enterprises, which will then not be dependent on operators to achieve their SLAs. Distributing the valuable 5G spectrum in the hands of a few companies could limit the growth opportunities and promise that 5G brings.”

Shah, however, conceded that a consortium idea must be executed well with “full trust and transparency between the operators and the government”.

“The most difficult part is execution, and given Malaysian operators’ track record, it could be a challenge to how they work within the consortium,” he said.

MCMC needs to ensure that proper governance and policies are in place [so] all players in the consortium have equitable access to a common network and avoid ... favouritism to any one licensee in the group
Zaim Halil, IDC

IDC senior research manager Zaim Halil agreed, noting that the one-consortium network idea could lead to a monopoly, which means there will be issues with ensuring equitable access to the 5G network, he told Computer Weekly in an email interview.

“MCMC needs to ensure that proper governance and policies are in place to ensure all players in the consortium have equitable access to a common network and avoid any semblance of favouritism to any one licensee in the group,” he said.

Meanwhile, the head of the GSM Association (GSMA) in Asia, Julian Gorman, conceded that a single consortium idea has technical challenges.

“The single consortium approach does have some challenges, such as so many operators relying on a single network,” he said. “The one thing coronavirus has highlighted is the risk of a single network, where it could be a single point of failure, like when Singapore’s StarHub fibre network suffered an outage on April 15.”

Uncertain roadmap

Industry observers said it is not uncommon for new faces to put forward their own plans instead of following a previously designed playbook. As such, they argued that it is still too early to predict what Abdullah’s cadre of newly appointed executives will do in the coming months with regards to Malaysia’s telco policy.

But the minister’s press statement did indicate that plans are underway to review MCMC’s policies in three areas: infrastructure development, 5G-readiness, and governance and institutions.

These include efforts to “accelerate broadband coverage in urban, sub-urban and rural areas; refinement of 5G spectrum distribution strategy for optimum use; and a review of the industry structure to ensure sustainability and equilibrium in the long term”.

To enhance governance performance and institutional transparency, the minister’s powers will be revised to have a check and balance system, it added.

Of particular interest to the industry is whether the single consortium idea will ever come to fruition.

Said another industry insider: “With a new communications minister, an MCMC chairman and an adviser to the minister in play – both of whom are former Telekom Malaysia executives – the idea of a consortium may not see the light of day as they may revert to the old way of doing things: to award spectrum based on a beauty contest.”

The coronavirus factor

Besides these developments, industry observers pointed out that Abdullah’s reference to accelerate broadband in suburban to rural areas could likely mean that 5G roll-out may be scaled back due to the impact of the coronavirus pandemic.

Abdullah went on the record with a local news portal, saying that while 5G technology is important, it isn’t the priority now and that Malaysia is not going to use its resources to roll out networks immediately.

“The priority is to make full use of the 3G and the 4G [networks] and ensure full connectivity because that is what is required,” he said.

The coronavirus situation has certainly exacerbated the strain on telco networks because of the increased emphasis of working and learning from home.

A recent KPMG Malaysia survey noted that 69% favoured working from home even after the Malaysia’ restriction period – known as Movement Control Order (MCO) – is lifted sometime in the future.

But what’s more worrying is that those polled revealed that 64% of respondents faced challenges while working from home, with the top three difficulties being network issues (61%), communication barriers (14%), and lack of technology readiness (10%).

Industry watchers believe this would likely mean that the 700MHz spectrum will be used for 4G coverage enhancement rather than for 5G roll-out initially.

Counterpoint Research’s Shah said since the auction results have been cancelled by the MCMC, this scenario presents an opportunity for the government and all operators to reassess their spectrum assets and chart the future accordingly.

“The 700MHz can be used flexibly to improve the fallback coverage for 5G by deploying an advanced LTE network on it,” said Shah.

“Moreover, fixed broadband subscription is still quite low and 5G fixed wireless access could be one of the strategies which call for rethinking on how to allocate spectrum for the future. Put simply, the spectrum purchase will have to be more strategic for operators and for the government.”

Whatever the case is, the spotlight will certainly be on MCMC’s Suhaimi and Abdullah’s telco adviser, Mohd Isa, with regards to developments in Malaysia’s telecoms landscape in the coming months.

“There’s a national interest in the picture and the powers that be will need to balance the advancement of the industry and narrowing the digital divide in the light of the post-coronavirus era,” said an insider.

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